Saying the British-Swedish company is suspected of "misuses
of governmental systems and procedures," European Union Competition
Commissioner Mario Monti opened a formal investigation Thursday. The
so-called statement of objections is a preliminary finding of suspected
misconduct, and EU officials emphasized that such statements don't
prejudge the outcome of the investigation or constitute a legal finding of
wrongdoing.

AstraZeneca called the allegations "groundless" and said it
would appeal any penalty to the European Court of Justice in Luxembourg.
The company said the European Commission was using "a novel application"
of EU antitrust laws.

Push for Competition

In most antitrust cases, the EU doesn't disclose its
allegations so openly before conducting a formal investigation. By issuing
the statement of objections now and pursuing a new legal approach, Mr.
Monti appears to be escalating his efforts to force big pharmaceuticals
companies to face more competition.

The AstraZeneca investigation breaks new legal ground, EU
officials said. Usually, antitrust officials gather evidence of abuses
such as price manipulation or licensing restrictions. In AstraZeneca's
case, the commission alleges the company misled regulators during the
patent-extension process.

For example, the commission contends AstraZeneca concealed
from some national patent offices the date it received the first EU
marketing authorization for the ulcer drug Losec. The aim was to extend
patent protection by as much as five years in those countries, the
commission alleges.

If the commission determines a company has broken antitrust
laws, fines of as much as 10% of annual global sales can be levied, though
penalties tend to be much less, and EU antitrust investigations can drag
on for years. AstraZeneca's 2002 sales totaled $17.8 billion.

Known as Prilosec in the U.S., Losec was once among the
world's biggest-selling drugs. But global annual sales fell to $3.1
billion in 2002 from a peak of $6.2 billion in 2000, in part because of
generic competition. AstraZeneca was formed in April 1999 through the
merger of Astra AB of Sweden and Zeneca Group PLC of the United
Kingdom.

Mr. Monti's move opens a new front in his efforts to allow
consumers access to cheaper drugs. He already has supported allowing
so-called parallel importers to buy drugs cheaply in southern Europe and
re-export them to northern Europe, where they are more expensive.

Seeking Cheaper Drugs

The investigation comes as efforts to hold down drug prices
are spreading. In the U.S., the House of Representatives overwhelmingly
passed a measure last week allowing pharmacies and wholesalers to import
cheaper prescription drugs from 25 countries. While such parallel
importing exists in Europe, pharmaceuticals companies have gone to court
to try to stop it. Even without cheap imports, many EU countries reduce
drug spending by having a single government agency set strict limits on
reimbursements.

Pharmaceuticals companies complain they are being squeezed
and must rely on U.S. sales to fund vital research and development.

The commission began an informal probe of AstraZeneca after
receiving complaints from two generic-drug makers in 1999. It conducted
surprise raids on AstraZeneca offices in London and Soedertaelje, Sweden,
in February 2000.

In addition to alleging misrepresentation to extend patent
protection, the EU is challenging AstraZeneca's decision to ask national
medical authorities to stop authorizing the marketing of an older capsule
form of Losec in favor of exclusive marketing of a tablet form. The
commission believes this so-called deregistration of the older form of
Losec was intended to stymie generic-drug manufacturers and importers of
the older capsule forms.

"AstraZeneca is very aggressive," said Thilo Bauroth, a
lawyer for the discount importer Kohlpharma in Merzig, Germany. "They're
sending us warning letters all the time."

AstraZeneca's spokesman in Sweden, Staffan Ternby, said the
company will submit a formal response to EU regulators "within weeks."